Location matters. Last month, a new report from the Institute of Medicine confirmed what Dartmouth’s researchers have been telling us for more than three decades: health care spending varies across regions. More recently, as Dartmouth’s investigators have drilled down into othe data,, they have shown that even within a region, Medicare spends far more per beneficiary in some hospitals than in others.

Some health care analysts claim that as a nation, we spend far more on health care than any other developed country because we over-pay for everything—from statins to surgery. (A landmark article that appeared in Health Affairs in 2003 put it this way “It’s the Prices Stupid!” )

Others put more emphasis on overtreatment. Up to one-third of Medicare dollars are squandered, physicians like Dartmouth’s Dr. Elliott Fisher, Boston surgeon Atul Gawade and former Medicare director Dr. Don Berwick argue. As Fisher puts it, “hospital stays in the U.S. may not be as long as in some other countries, but more happens to you while you’re there.” (Note: the authors of “It’s the Price’s Stupid” also point out that care in the U.S. is “more intensive.”)

I agree that both theories are true: We have managed to devise a health care system where we both over-pay AND are over-treated. The Institute of Medicine report that came out at the end of July supports this thesis.

But, he adds, “There is one important difference between Medicare and commercial insurance, the Institute found, and that is in the causes of spending variation. With commercial insurance, spending is higher in some areas because of markups — that is, the difference between the charge for a service and the cost of providing that service.

“Seventy percent of the variation in commercial spending was attributed to differences in markups, which in turn probably reflect local differences in market power among hospitals and other providers relative to insurance companies and beneficiaries.”

If you, your spouse or an adult child is self-employed, no doubt you already know just how expensive insurance is in the individual market. Moreover, you know how difficult is to find comprehensive coverage when you’re buying your own insurance. For example, most policies don’t cover pre-natal care, or child-birth– a huge problem for young women.

But under the Affordable Care Act everything changes. Beginning in January, you will be able to purchase a policy in your state’s Exchange—a one-stop marketplace where you can shop for plans. They will be easy to compare because all policies sold in the Exchanges must cover “10 essential benefits” including pre-natal care, maternity, dental and vision care for children, rehab and mental health care. There will be no no co-pays for preventive care and the deductible does not apply.No matter how much care you or your family need, there will be a cap on your out-of-pocket expenses of roughly $6,000 for a single individual or $12,000 for a family. (These rules apply to anyone buying their own insurance in the Individual Exchange, whether they are self-employed, unemployed, or work for an employer who doesn’t offer affordable, comprehensive health benefits.)

Lower Premiums, Subsidies

In the Exchange, you will automatically become part of a large group, and as a result, premiums will be lower than the premiums you would papy today for similar coverage.

How Much Can You Deduct?

To calculate your allowable health insurance deduction, take your self-employment income, and subtract the 50% deduction for self-employment taxes. Then subtract any retirement contributions made to SEP-IRA, SIMPLE-IRA, or Keogh plan. The remainder is how much you can deduct for health insurance expenses.

Last week I interviewed a doctor who told me that his primary care doc is a “physician assistant” who has been trained to deliver primary care. He said it casually, dropping the fact into a long conversation.

Dr. David Kauff is an internist at Seattle’s Group Health Cooperative (GHC), an organization that has a fabulous reputation–both among patients and among physicians—for its primary care program. One reason is that at Group Health, doctors, physicians assistants and nurse practitioners work together in teams. “The success of our model is based on the fact that everyone in this together; we are corralled by a common purpose,” says Kauff, who also serves as GHC’s Medical Director for Practice and Leadership.

I’ll be writing more about Group Health Cooperative in a few days.

In this post, I would like to focus on the growing role of Nurse Practitioners (NPs) and Physician Assistants (PAs) as clinicians. NPs are registered nurses who have gone on to earn a master’s or a doctorate. Some specialize in areas such as anesthesiology, pediatrics (pediatric nurses) or Ob-Gyn (certified nurse-midwives). NP’s can run clinics; some run their own practices.

By contrast, physician assistants (PAs) don’t usually work alone. While physicians may not be on-site, typically doctors oversee their work.

PAs are formally trained to provide diagnostic, therapeutic, and preventive health care services. They take medical histories, examine and treat patients, order and interpret laboratory tests and X- rays, and make diagnoses. In many cases, they did not begin their careers as nurses. They may have been paramedics, respiratory therapists, or emergency care technicians (EMTs) before becoming PAs.

Currently, 17 states, plus the District of Columbia, let nurse practitioners operate independently. In 33 states regulations vary. As this map reveals, in some places NPs are not allowed to prescribe medication. In others, they may have to consult with a physician when treating patients.

Most NPs also have nursing experience. At the University of Michigan, for instance, the average candidate admitted to the NP program has 7 years of hands-on experience as a nurse. But while the number of years spent training are not so different, as I explain below, traditionally ,the nature of that training has been very different.

Dr. John Rowe, a professor of Health Policy and Management at Columbia’s School of Public Health, doesn’t buy the argument. As he points out, nurse practitioners are already working without primary care doctors: “The fact is this is going on in 16-17 states,” he told Gorenstein, “and there is no evidence that it’s not good for the patient.” A recent Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation backs him up: “studies comparing the quality of care provided by physicians and nurse practitioners have found that clinical outcomes are similar.”

Note to readers—please read the post below, “Pulse—More Stories from the Heart of Medicine” (which includes “One More Child Left Behind”) before you read this post.

When I read “One More Child Left Behind,” all I could think of was how much Aaron’s arm must have hurt during the more than 24 hours that he didn’t receive treatment. I also imagined how frightened and bewildered the six-year-old must have been as he heard his mother and grandmother talk, and realized that they couldn’t persuade a doctor to help him.

Why on earth would we pay doctors and hospital less to care for poor patients than we would pay them to care for the elderly?

Lower Medicaid fees are part of the legacy of racism. (I write about this in Money-Driven Medicine.) When the Medicare and Medicaid laws were passed in 1965, Southern Congressmen refused to agree to laws that would pay doctors who treated the poor as much as they reimburse physicians who care for older patients.

At the time, relatively few African-Americans living in the South were over 65. Most died long before they would be eligible for Medicare. Yet many African-Americans were poor, and would qualify for Medicaid. This is what disturbed Southern legislators. They wanted to make sure that healthcare remained segregated.

Even under Reform, Specialists Who Treat the Poor Will be Under-Paid

Medicaid rates vary widely by state, but on average, according to the Kaiser Family Foundation, the new program will offer PCP’s a 73 percent raise This should open doors for millions of Medicaid patients. In some states that have been paying the lowest rates, the hike will be much higher. (See this map) The ACA guarantees raising Medicaid reimbursements for primary care for just two years (2013-2014). But I expect this program will be extended, although increases may be modified. Once begun, it will be very hard to justify ending it.

At the same time, specialists who care for Medicaid patients will continue to receive about 1/3 less than when treating seniors. As a result, even under the ACA a great many Medicaid patients will be hard-pressed to find a specialist willing to see them.Continue reading →

Last week, in his State of the Union address, President Obama embraced the first two: “Already, the Affordable Care Act is helping to slow the growth of health care costs,” he noted. “The reforms I’m proposing go even further. We’ll reduce taxpayer subsidies to prescription drug companies and ask more from the wealthiest seniors.” (In time, I suspect that the administration also will call for a ban on those decidedly seamy “pay for delay” deals.)

The January 26 post below (“How to Rein in Medicare costs without Hurting Seniors“) has drawn some 43 comments (including mine, as I responded to readers). I thought of turning a couple of my replies into posts, but then decided it might be more interesting for you to read them in the context of what other readers said.

I would love to see more readers participate in this thread. Comments are still open.

It’s a lively thread that takes on a number of third-rail issues: Does Medicare spend too much on pricey cancer drugs, end-of-life care and brand name hospitals?

Should we try to spend less on end-of life care? Many say “Yes,” but Zeke Emanuel (a medical ethicist and oncologist who was part of the Obama team during the president’s first term), says “No.” I link to a column where he notes that “It is conventional wisdom that end-of-life care is an increasingly huge proportion of health care spending. . . Wrong. Here are the real numbers: end-of-life care (not just for the elderly, but for all Americans) accounts for just 10% to 12% of total health care spending. This figure has not changed significantly in decades.”

He goes on to suggest that while we probably can’t make end-of-life “cheaper,” we can make it “better . . . Here are four things the health care system should do to try to improve care for the dying, even if they won’t save money.”

A number of readers comment on what is driving Medicare spending. Is it “patient expectations,” “doctors’ fear of litigation,” “regulations that dictate nurse-staffing ratios,” “practice patterns that doctors learned long ago,” or is the biggest problem “promotional efforts by manufacturers?”

Other questions come up: Does anyone really have any idea how much Medicare will cost in 2022? By then will Medicare have begun negotiating with drug-makers and device-makers for discounts on drugs (the way the VA does now, saving 40%)? How far will Medicare go in using medical evidence to decide what to cover?

One doctor/reader points out that in his field Medicare has begun to refuse to pay for procedures when research shows that they are not effective. He and another reader agree that in this way Medicare can provide “political cover” for private sector insurers who will follow Medicare’s lead.

And is the deficit our biggest problem? On this question, you will find links to Paul Krugman, Peter Orszag (who analyzes the slow-down in health care spending over the past three years as a “structural change, not just the result of the recession) and Ezra Klein,

The administration pays attention to CAP. Recently Bloomberg News described CAP as “the intellectual wellspring for Democratic policy proposals, including many that are shaping the agenda of the Obama administration.” This suggests that the report’s proposals may offer a preview of “adjustments to Medicare spending” that the president would consider.

How would CAP save $358 billion without rationing benefits or shifting costs to middle-class seniors? The report focuses on squeezing waste out of the system. Waste doesn’t help beneficiaries.

During recent fiscal cliff negotiations, Democrats and Republicans agreed to adopt four of CAP’s proposals, and I suspect that, over time, we will see more of its recommendations become part of the reality of health care reform.

Recently, I interviewed CAP president NeeraTanden and Topher Spiro, CAP’s managing director for health policy. I was impressed by how their practical approach differs from conservative strategies for slicing “entitlements.”Continue reading →

I don’t always agree with the Economist: the UK publication has its own sometimes eccentric slant on things. But on the whole, it is a thoughtful publication—well-researched and fact-checked. Moreover, in this case, distance may give the Economist a perspective on the problem that some in the U.S. lack.

This assumes that once we miss the January 1 deadline, tax hikes for the middle-class would become permanent—which, of course, is not true. Talk about how much more a family would pay over the course of 2013 falls somewhere between hyperbole and hysteria, ignoring what everyone knows: